P11D Information Sheet to 5th April 2023
The end of the tax year signifies the need to prepare forms P11D to notify HMRC of any benefits arising to employees in the year to 5 April 2023.
If you would like us to prepare the Forms P11D for you this year we would be grateful if you could forward all the required information as soon as practicable, to reduce any “last minute” panics prior to the filing deadline on 6 July 2023.
As we are sure you are aware, the Form P11D details expenses and the value of benefits in kind for all employees and directors.
We would remind you that there are substantial automatic penalties for late submission and for incorrect completion of Forms P11D.
We detail below the main items to be reported on Forms P11D and note the associated National Insurance charges that arise on these benefits. This, while reasonably comprehensive, is not an exhaustive summary so if you are not sure if something might be classed as a benefit, please contact us.
National Insurance Contributions
Class 1A Contributions
Class 1A national insurance contributions apply to all taxable benefits in kind except those that are: –
- already subject to Class 1 NIC (these should be put through the payroll or be subject of a PAYE Settlement Agreement)
- included in a PAYE Settlement Agreement (employer meets the tax and NI liability)
- not required to be reported on a P11D
The main areas to consider are cars, vans, fuel for private use, private health care, staff entertaining/subsistence payments, use of corporate credit cards, personal incidental expenditure, and loans.
The rate of Class 1A contributions for the 2022/2023 tax year which are payable by employers only is 13.8%. The contributions are due for payment on or before 19th July (or 22nd July if paid electronically)
Cars
This is often the main item to be reported on Forms P11D. The forms need to be completed for any employee who, at any time during the year, had the private use of a motor car supplied by the company. Private use means any private travel. For instance, the employee may not use the car in his own time but may from time to time take it home. This journey is viewed by HMRC as private and the benefit will be chargeable.
If there is any doubt about the possible benefit for any employee, then make a note and we can review each case separately.
The employees that do have the benefit of a company car should have a Form P11D completed, and the value of the benefit is a percentage of the list price of the car when it was new (not the price paid for the car). This is the case even if the car is second hand or is part of a lease agreement. The percentage applied is graduated per the level of the car’s carbon dioxide (CO2) emissions and will also be determined by the number of miles it can travel purely on electricity.
The employee may also have the benefit of private fuel (see below) and this is also based upon CO 2 emissions of the car and the type of fuel used.
Vans
Where an employee has private use of a company van there will be a benefit in kind charge based upon a fixed amount of £3,960 (2022/23). This benefit may be shared between employees if more than one uses the same van privately. An additional fuel charge of £757 will also apply for unrestricted private use (see below). However, if the van has zero emissions there is NIL benefit in kind charge.
Fuel for private use of a Company Car or Van
Where all fuel is paid for by the employer (e.g. payments made by company fuel or credit card) and there is no obligation to reimburse the employer for fuel used for private travel, a scale charge will apply based on the carbon dioxide emissions of the car and the type of fuel used.
This scale charge can be punitive; however, it can be negated in two ways:
- Employee pays for all fuel and then claims reimbursement from the employer for business mileage, or
- Employer pays for all fuel and is then reimbursed by the employee for private mileage
Where the employee reimburses the employer for fuel used for private travel, reimbursement must be made in full for the scale charge to be negated i.e. if even one litre of fuel is used for private travel without reimbursement to the employer, the scale charge will apply.
It is good practice to maintain mileage and reimbursement records to evidence the reimbursements made to the employer.
Reimbursements are treated as negating the scale charge if they are paid during the tax year in which the fuel was used. This is sometimes impractical e.g. where mileage records and repayments in respect of the final months of the tax year are settled after the year-end and HMRC guidance says that they will normally accept reimbursements after the year-end where no “unreasonable delay” has occurred, and needs to be paid to the company by 6 July 2023.
Goods or Services
If you supply your employees with any goods or services, then the way they were provided needs to be reviewed to determine how it should be reported to HMRC.
It may be that you have given gifts to your employees for their services to the company and if these gifts are cash, then they should have been put through the payroll. If the gifts were other than cash, they are still likely to be taxable based upon the value of the gift. If the gift is capable of being exchanged into cash, then there will also be national insurance complications.
It is important that all gifts are reviewed on an individual basis to ensure they are properly recorded.
Any services supplied to your employees may also be taxable and, again, should be carefully reviewed.
Home Telephone Bills
Many employers pay employee’s home telephone bills, or a proportion of it, as they may be used, at least in part, for business purposes.
The payment of the home telephone bill should be recorded on a Form P11D and there may also be a national insurance charge depending how the payment of the bill is dealt with:
- If the employer subscribes for the only telephone line in the employee’s home, the cost of any private (i.e. non-business) calls should be calculated. Any part of this cost which is not reimbursed by the employee should be entered on Form P11D together with the whole of the line rental costs. Class 1A NICs will be due.
- If the employer subscribes for a separate telephone line in the employee’s home which is to be used only for business calls, there will be no need to disclose the costs on the Form P11D.
- If the home telephone line is in the name of the employee and all of the costs are paid by the employer, as the liability is that of the employee you should strictly put the cost of the full line rental and call charges through PAYE and deduct tax and national insurance accordingly. Any business calls which can be identified can be excluded. If this has not taken place you should enter all home telephone costs paid by the employer on the Form P11D. The employee can then make the relevant claim on the Tax Return in respect of business call charges.
- If the employer simply reimburses the employee for the cost of business calls made at home, this is covered by an exemption. It will be necessary to maintain records of business calls and reimbursements made.
Mobile Telephones
Only one mobile telephone may be provided tax-free to any one employee.
The provision of a voucher to an employee to making a telephone available for private use will not create a benefit-in-kind provided that the “single telephone” rule is observed. This includes “pay as you go” vouchers.
However, where an employer pays bills in respect of a mobile telephone in the employee’s own name, as the liability is that of the employee you should strictly put the cost of the full line rental and call charges through PAYE and deduct tax and national insurance accordingly. Any business calls which can be identified can be excluded.
If this has not taken place you should enter all telephone costs paid by the employer on the Form P11D. The employee can then make the relevant claim on the Tax Return in respect of business call charges. It may be difficult to establish the cost of business calls and where a flat monthly fee is paid for line rental and calls, no expense can be said to have been incurred by the employee specifically for business calls and therefore no deduction can be permitted.
Loans of Computer equipment
Loans of computer equipment e.g. laptops are taxable where there is private use. Where that private use is not considered to be significant and where the primary purpose of the loan is for business purposes no tax charge will arise.
The term “not significant” is not defined by statute however you may wish to consider your policy on private use of any computers supplied to employees e.g. asking employees to sign a statement acknowledging what use of the computer is allowed and any disciplinary consequences etc.
The key issues are the use of the computer in the context of the employee’s duties and the necessity for the employee to have the use of the computer to carry out those duties.
Private Medical Expenses
If an employer has paid for a medical check for any employees to determine their fitness for work, then this need not be reported as a benefit. However, if any private medical insurance or individual private medical expenses are paid for any employees then this should be shown in the appropriate place on the Form P11D.
If you pay an employee’s expense under his personal contract with the insurance company as the liability is that of the employee, you should strictly put the full cost through PAYE and deduct tax and national insurance accordingly. If this has not taken place you should enter the full cost on the Form P11D.
The cost of any necessary medical treatment abroad borne by the employer or borne by the employee and reimbursed by the employer, where the employee falls ill or suffers injury while away from the UK in the performance of his/her duties/or the cost of providing insurance for such treatment, is not taxable.
Professional Subscriptions
Very often an employer may pay the professional subscriptions for an employee and omit this from the Form P11D as the expense is usually allowable for tax. If the invoice for the subscription is in the name of the employee, then this is a benefit in kind and should be reported on a Form P11D with the corresponding tax relief claim being made by the individual on their own personal tax return. No liability to Class 1 or 1A NIC arises if the subscriptions are allowable for tax purposes. If, however the subscription is not eligible for tax relief a liability to Class 1 or 1A NIC will arise.
Christmas parties
The exemption for Christmas parties and other annual events is £150 per head. The exemption applies to annual parties and annual events open to staff generally.
The total cost of the function, including VAT and any transport or accommodation provided must be divided by the number of persons attending, whether staff or guests. If the average cost per head exceeds £150, the employees attending alone will be assessed on the cost per head and employees bringing guests on a multiple of this cost. It is not just the excess over £150 that is assessed
Where there is more than one annual function and their total cost per head exceeds £150, only the functions that total £150 or less will not be taxed.
Trivial Benefits
The basic rule is that an employer can provide trivial benefits such as a bunch of flowers, a box of chocolates, a meal out, without having to put it on the P11D and without any tax or national insurance for either employer or employee. The employer will also be entitled to claim income tax or corporation tax relief on the cost.
There are three key conditions:
- the trivial benefit must cost no more than £50
- the benefit must not be a reward for services or in any way contractual
- the benefit must not be cash or a cash voucher
Accommodation
It may be that employees are provided with cheap or free accommodation and there are specific rules concerning the taxability of this benefit. Each case will need a careful review to determine if an actual benefit arises.
Interest-free or low interest loans
If an employee or director has a loan from the company and has not paid a commercial rate of interest, then it is possible that the value of the interest (or the difference between a commercial rate and the amount paid) will constitute a benefit in kind. There are de minimis levels regarding the amount of the loan and there are also a few exceptions to the rule. Any overdrawn director’s current account will be treated as a loan from the company. In the main, any loan with a maximum outstanding balance of less than £10,000 will not be a chargeable benefit in kind.
Additional household expenses
If you cover the cost of additional household expenses for an employee who works from home, you do not have to report or pay anything if all the following apply:
- they need to work from home, either because equipment they need is not available at your workplace, or their work means they must live too far away from your workplace to travel there every day
- the amount you give them is not more than their additional household expenses, heat light, water only. Directors of limited companies are not allowed to claim for mortgage costs, home insurance, repairs, cleaning, rent or Council tax.
- the amount you give them is not more than the current weekly limit of £6.00 per week.
Summary
The responsibility for calculating the value of any benefits has been placed upon the shoulders of the employer who must supply each employee concerned with a copy of the Form P11D detailing their benefits. This form will then be used by the employee to complete their self-assessment tax return. If you have made a mistake the employee may come back to you regarding any penalty received because of an incorrect Form P11D and resulting incorrect tax return.
If you would like any further advice regarding the above, have any P11D/End of Year queries, or would like further advice regarding exemptions please contact us.
